The Pension Fund Regulatory and Development Authority (PFRDA) has approved a series of important policy reforms aimed at further strengthening the National Pension System (NPS).
These changes are designed to expand pension fund options, increase competition within the system, and provide better protection for investors, also known as subscribers.
The reforms focus on improving governance, transparency, and long-term sustainability of the pension ecosystem.
Banks Allowed to Set Up Pension Funds
In a major decision, the PFRDA has given in-principle approval to scheduled commercial banks to independently set up pension funds and manage NPS deposits.
Until now, regulatory restrictions had limited the role of banks in the pension fund sector.
This move is expected to bring more players into the NPS framework, increase competition, and provide subscribers with a wider range of pension fund choices. It will also help improve efficiency in managing retirement savings.
Which Banks Will Be Eligible?
The regulator has made it clear that this permission will not be granted to all banks. Only banks with a strong financial position and proven reliability will be allowed to sponsor pension funds.
Eligibility will be evaluated based on several factors, including the bank’s net worth, market capitalization, and overall financial strength, in line with Reserve Bank of India (RBI) norms.
The detailed eligibility criteria will be announced later and will apply to both newly proposed pension funds and existing ones.
New Appointments to the NPS Trust Board
To improve governance and oversight, PFRDA has appointed three new trustees to the NPS Trust Board after a formal selection process. The newly appointed trustees are:
Dinesh Kumar Khara, former Chairman of the State Bank of India (SBI)
Swati Anil Kulkarni, former Executive Vice President of UTI Asset Management Company
Arvind Gupta, co-founder of the Digital India Foundation
Dinesh Kumar Khara has also been appointed as the Chairperson of the NPS Trust Board. These appointments are expected to strengthen decision-making, transparency, and overall governance of the NPS.
Changes in Investment Management Fees
The PFRDA has also revised the Investment Management Fee (IMF) structure for pension funds. The new fee structure will come into effect from April 1, 2026.
Under the revised framework, different fee rates will apply to government sector and non-government sector subscribers.
This differentiation has been introduced to better protect investor interests and ensure fairness across different categories of subscribers.
The revised IMF structure will also be applicable to schemes operating under the Multiple Scheme Framework. The pension corpus for each scheme will be calculated separately.
However, PFRDA has clarified that the annual regulatory fee of 0.015 percent paid by pension funds will remain unchanged.
Objective Behind These Reforms
According to the PFRDA, the main goal of these reforms is to make the NPS ecosystem more competitive, better governed, and financially sustainable over the long term.
The changes are intended to strengthen trust in the system and improve retirement outcomes for subscribers.
These reforms will benefit a wide range of participants, including government employees, corporate sector workers, retail investors, and members of emerging workforces, helping ensure a more secure and stable retirement future for all.
